In this article, the team from Leaptrucks, one of the largest marketplaces for buying and selling used trucks and buses, takes a look at the trends in the Small Commercial Vehicle (SCV) industry over the first five months of a very difficult year for the CV sector. The chart below details the performance of the major players in the SCV segment, namely, Tata Motors, Ashok Leyland, Maruti and Mahindra.
The story thus far
The pandemic has had a disproportionate impact on the CV industry. However, as we had mentioned in our article last month, we had predicted that the SCV segment will lead the industry to recovery. While Q1 2020 was a challenging quarter and July saw a huge improvement over Q1, August has proved to be a turning point for the segment to move from monthly declines to a growth phase. Demand has recovered and supply constraints are slowly easing up. The recovery in this segment has happened quicker than anticipated and the microeconomic trends point to sustained growth for the rest of the year.
Overall segment performance
It is clear from the SCV sales figures that the segment is leading the CV industry out of the pandemic. While sales dropped by over 77% in Q1 2020, the drop in July 2020 was 13% which has turned into a growth of 7% in the month of August 2020. On the supply side, plant shutdowns due to Covid and component supply issues are both under control. On the demand side, strong rural demand (including agriculture) and last mile connectivity (in urban areas locations driven by e-commerce) are driving the growth of this segment.
Manufacturer level analysis
All manufacturers have improved their position considerably in August over both Q1 2020 and July 2020. Tata Motors has improved its performance from a drop of 86% in Q1 2020 to a 3% growth in August 2020 (Tata Motors numbers are not available for July 2020). This has been driven by improved sales of Tata Ace Gold and Intra products. Ashok Leyland has also significantly improved its performance and finished August with a nominal drop of 3% with sales of Dost vehicles. Maruti Super Carry has also performed very well last month showing the highest growth year on year in the category with a gain of 47%. Mahindra has also had a very good month in August 2020 with a growth of 9% over last year to cross 15,000 units sold for the first time in 2020. It also makes them a strong No.1 in this segment.
So, what can we anticipate in the coming months?
- Sustained demand: Demand will gather momentum and sustain over the coming months. While segments like Agriculture and Ecommerce will continue to drive growth, segments that had muted demand until August will also start adding to the demand with Unlock 4.0. This growth will sustain through the end of the year.
- Improved supply: All manufacturers in this segment continue to have order backlogs with low levels of dealer inventory. Fast moving models are stocked out at dealerships in this segment. We anticipate that manufacturers will be able to improve supply and minimize lost sales in the coming months.
- Customer migration to higher GVW: Customers will look to migrate to products that offer a better cost / ton advantage. With BS6, the cost of entry level products in this segment have increased by 15% to 20%. Customers will look to migrate to products that will offer a higher payload capacity at a slightly incremental price.
- Technology leadership: All manufacturers will be looking to establish technological leadership in this segment in BS6. With different types of technology being used in the SCV range, all brands will be working hard to offer products that are easy to maintain with a low cost of maintenance
- Intense competition: We anticipate intense competition in this segment with existing products and new products. AL will soon be introducing the Bada Dost in the market to compete effectively in the Pickup sub-segment with Tata and Mahindra. Similarly, we also anticipate a very intense battle between Tata, Mahindra and Maruti in the sub 1 ton payload category.
- Government orders: This segment will also benefit from orders from municipalities across the country for waste handling as part of the Swachh Bharath initiative.
In summary, we are quite bullish on the prospects of the SCV segment and expect SCVs to continue growing sustainably in the coming months and lead the CV industry recovery.
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